FIRST, I have never represented and am not affiliated with Emperador, Hotel 101, ICTSI and Jollibee, and it has been decades since I represented Universal Robina. I barely know Enrique Razon, Tony Tan Caktiong, and Andrew and Kevin Tan, and I have never met Injap Sia. I do know Lance Gokongwei, his siblings and James Go.
Some of my clients in Southeast Asia moved from being major or even dominant players in their home market and then took on the challenging and much more difficult challenge and expanding outward in their core business rather than just horizontally to other businesses in their home market, often doing both. Yet, what by contrast do many of our leading conglomerates do? Stick to the Philippines and instead expand horizontally into unrelated areas. Nothing wrong with that and frankly, it is probably easier than expanding regionally or even internationally in your core business. They are taking advantage of their strong position in the core business in their home market to expand to other areas in their area of strength. Putting it another way, they consider it more promising and profitable to expand products or area in their home market rather than expand their products’ reach into other markets. It implies their bigger strength is clout in the home market rather than in their product or business expertise even on a regional basis.
Vertical expansion internationally is harder, with probably lower margins, but if you get it right and it takes much time and effort, your growth path and horizons are so much bigger. And the biggest lesson of all, it even helps bring best practices versus complacency and, at worst, rent-seeking in the core domestic business. To successfully do that, it helps to be brave; it is critical to be focused, accept mistakes and while it is harder to succeed internationally than to expand horizontally in the Philippines, you will eventually limit your size and success if you don’t.
These five, in common with some of their more enterprising and bold regional competitors, are taking the regional and international expansion path. Harder but if you get it right, more lucrative. By doing what they have developed considerable expertise in and applying it outside the Philippines, they have achieved initial and considerable and broad success. I wish them more success and to keep that pioneering ambition and hope they continue on that path and others join them. Let’s take them alphabetically. What lessons do their international ambitions and success show us?
Emperador, which is listed both in the Philippines and Singapore, is part of Alliance Global and is majority-owned by Andrew Tan and family. He is unique in that he first took Megaworld public through a domestic-only IPO in 1994. A much humbler and low-key exercise but I do remember back in 1995 hosting a lunch meeting in Hong Kong while I was at Salomon Brothers to meet Andew Tan when he started assiduously courting international investors and increasing the profile of Megaworld and eventually his other companies. He did not de-emphasize building his companies but took care of curating their profile and investor reach as well. The subsequent success shows the fruits of that dual strategy. How unique was it? Look at the other real estate companies that went public during the short-lived IPO boom in the Philippines from 1993 to 1997 and see how many are still thriving. SM Prime and Filinvest are the only ones together with Megaworld and the other two were bigger at the time of going public.
Emperador, as per its website, is the largest liquor company in the Philippines and the world’s largest producer of brandy and has domestic brands and a wide range of international brands as well. Beyond brandy, they have locally made whiskey plus a wide range of Scotch whiskey, including acclaimed single malts they acquired that they then promoted and distributed more widely given their marketing and distribution heft from the niche brands they previously were.
I have lamented how not just major hotel brands were successfully started and managed out of Asia like Mandarin, Peninsula and Shangri-La, and most recently Thailand’s Minor Group, but we have none, yet we staff so many of them. I am happy we now have Hotel 101, and I wish them great success in their focused expansion and creating a consistent and reliable brand identity and reputation.
Then there is the biggest of all of them, ICTSI. They are the biggest port operator by far in the Philippines but applied the lessons and practices learned and combining it with international quality management and standards to expand elsewhere and very successfully. They initially had to sell the bulk of their international operations post the 1997 crisis, which was a prudent move, and once that was behind, continued to acquire and run ports internationally with much success. To the surprise of many, they have reaped the benefits of that by becoming the largest company by market capitalization in the Philippines and making their controlling shareholder the richest person in the country as well.
Jollibee is a very interesting company that first took on the dominant global fast-food company to become the clear leader in the Philippine market and expanded on its dominance in related parts of the fast food market here. It did it by creating a clear Filipino identity and catering to the specific needs of its market, related expansion to capture scale, best practices, and then started looking outwards for its flagship company while also acquiring and developing other food companies. Both are successes in my view but are just at different stages. They dominate the Philippine market so growth may not be as high as prior and is more like a profitable company that can pay good dividends. International is like a high-growth but higher-risk company. I think their move to divide the two makes sense. You want a mildly growing but dominant annuity, buy the Philippine company. Want to bet on a high-growth story buy the international. I agree with their strategy to list the international in Hong Kong.
Universal Robina (URC) is a great regional snack food company that is the go-to brand for its products in many markets. A real tribute to the vision of Mr. John and the continued growth curated by the next generation. I covered the URC story in my article on Mr. John’s centenary so please look that up if you want more on that great regional story.
Disclosure: The author is an independent director of the state-run Maharlika Investment Corp.
